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Friday, April 4, 2014

North Carolina Paving Contractor Sentenced to Prison for Tax and Bank Fraud

Tommy Edward Clack was sentenced today to serve 66 months in federal prison for tax and fraud crimes by U.S. District Judge Thomas D. Schroeder in Winston-Salem, N.C., the Justice Department and Internal Revenue Service (IRS) announced. Clack was also ordered to pay $1,350,597 in restitution to the IRS and $20,945 in restitution to a bank he defrauded, and to serve five years of supervised release. Clack previously pleaded guilty to one count of willfully filing a false federal income tax return for 2007 and one count of knowingly making a false statement to a federally insured bank in order to obtain a mortgage loan.

According to court documents, for approximately the past 10 years, Clack has been a traveling, self-employed paving contractor doing business in North Carolina, South Carolina, Maryland and Florida. Clack operated under several different business names and changed the names frequently in order to avoid scrutiny by state and federal law enforcement agencies. Over the years, Clack was charged with and convicted of multiple state criminal violations in Maryland, North Carolina, South Carolina and Florida as a result of his business practices. Since June 2010, Clack has been under an injunction banning him from operating as a driveway paving contractor in North Carolina. He is also subject to a cease-and-desist order in Maryland that bans him from various fraudulent practices.

According to court documents, Clack significantly underreported the income from his paving business on his tax returns. From 2004 to 2007, Clack earned gross income of over $5.7 million, but reported only a fraction of it to the IRS. In 2004, Clack underreported his income by approximately $294,829. In 2005, he underreported his income by approximately $1,178,822. In 2006, Clack underreported his income by approximately $1,868,556. And in 2007, Clack underreported his income by $2,428,710. Clack’s returns were prepared by a professional accountant, but Clack knowingly provided her with false information on which to base his returns, and he signed his returns knowing that they significantly understated his income. Altogether, as a result of these false returns Clack underpaid his taxes by $1,350,597 for the 2004 through 2007 tax years.

According to court documents, Clack employed a number of strategies to conceal his tax fraud. In addition to constantly changing the name of his paving company, Clack did not maintain books and records. He also dealt extensively in cash, paid his employees in cash, and structured currency transactions with his bank in amounts designed to evade the bank’s requirement to file Currency Transaction Reports with the U.S. Treasury.

Court documents also state that in December 2003, Clack submitted a mortgage loan application in the name of his then-wife to a bank in Greensboro, N.C. The application sought a $640,000 loan as financing for the purchase of a $1.2 million home. As part of the loan application, Clack provided the bank with a tax return in his wife’s name for the year 2002 that claimed married filing separate status, reported adjusted gross income of $372,748 and claimed total tax liability of $127,745. Clack claimed that this tax return had been filed with the IRS, when in fact Clack and his then-wife had filed a joint federal income tax return for 2002 that claimed that the couple had adjusted gross income of $17,656 and a total tax liability of $2,685. The bank would not have approved the loan if they knew about the discrepancy. Clack ultimately defaulted on the loan and the bank suffered a loss after foreclosing on the collateral.

The case was investigated by the IRS-Criminal Investigation, with assistance from the North Carolina State Bureau of Investigation. It was prosecuted by Trial Attorney Jonathan Marx of the Tax Division with assistance from the U.S. Attorney’s Office for the Middle District of North Carolina.